From lithium to rare earths, how India plans to shield key industries from supply shocks

India is preparing to build a strategic reserve of critical minerals to reduce its exposure to global supply disruptions, import dependence and price volatility. The proposed stockpiling policy is expected to provide a buffer for industries ranging from electric vehicles and battery manufacturing to defence equipment and clean energy.

The policy is likely to be finalised within a month, Mines Secretary V L Kantha Rao said, according to Moneycontrol. The proposed reserve is intended to help domestic industries secure access to minerals that are essential for manufacturing but vulnerable to disruptions in international supply chains.

Critical minerals have become increasingly important as India expands its electric mobility ecosystem, renewable energy capacity, electronics manufacturing and domestic defence production. However, securing a reliable supply of these materials remains a challenge because the country depends on overseas sources for several of them.

A strategic stockpile could help industries manage temporary shortages, sharp price movements and disruptions caused by export restrictions or geopolitical tensions.

Why critical minerals matter for India

Critical minerals are materials that are economically important but face risks to their supply. Their importance varies across industries, but many are difficult to substitute because of their specific physical and chemical properties.

Lithium, for instance, is a key raw material for lithium-ion batteries used in electric vehicles and energy storage systems. Rare earth elements are used in permanent magnets, electric motors, wind turbines and several defence applications.

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Other minerals, including cobalt, nickel and graphite, are important to different battery chemistries and industrial applications. Some critical minerals are also required for semiconductors, advanced electronics and specialised manufacturing.

As India seeks to expand domestic manufacturing and reduce its dependence on imported finished products, the availability of these raw materials has become a strategic concern.

A disruption in the supply of even one essential input can affect production schedules, raise costs and delay investments. For manufacturers operating in competitive markets, sudden increases in raw material prices can also put pressure on margins.

How a strategic mineral reserve could work

Under the proposed policy, the government aims to build reserves of selected critical minerals that can be used to protect domestic industries during supply disruptions.

The effectiveness of such a system would depend on which minerals are included, how much is stored and how the reserves are managed. Minerals with high import dependence, limited alternative suppliers and significant industrial applications would be natural candidates for consideration.

The government would also need to determine how the material is procured, stored and released during a shortage. Decisions on whether the stockpile would be managed entirely by the government or involve industry participation would shape how quickly manufacturers could access the reserves.

Unlike regular commercial inventories maintained by companies, a strategic reserve would primarily serve as a safeguard against exceptional supply risks. It would not necessarily replace imports or meet the entire industry’s routine demand.

The policy’s final details, including the minerals to be covered, the scale of the reserve and its operational framework, will be important in determining its impact.

The challenge of import dependence

India’s exposure to critical mineral supply risks extends beyond the availability of raw materials. Processing and refining capacity is also concentrated in a limited number of countries for several minerals, leaving manufacturers vulnerable even when deposits are available elsewhere.

China occupies a major position in the processing of several critical minerals and in the production of rare earth materials and components. This concentration makes diversification difficult for countries seeking to reduce their dependence on a single supply chain.

India’s efforts to secure mineral supplies therefore involve more than identifying deposits or importing ore. The country also needs access to processing technology, refining facilities and the infrastructure required to turn raw materials into inputs that manufacturers can use.

A strategic reserve could reduce the immediate impact of a disruption, but it would not eliminate structural dependence on overseas suppliers.

Building domestic processing capacity and developing alternative international sources would remain important to long-term supply security.

Stockpiling is only one part of the strategy

India has been pursuing a broader approach to critical mineral security, including domestic exploration, overseas mineral acquisitions and efforts to strengthen processing and recycling capabilities.

The Mines Ministry’s National Critical Mineral Mission, approved in January 2025, aims to strengthen the country’s critical mineral value chain, covering exploration, mining, beneficiation, processing and recovery from secondary sources. The mission also seeks to support the acquisition of critical mineral assets overseas.

India has also been working to identify domestic mineral resources and encourage exploration of deposits that could reduce import dependence over time.

Recycling could provide another source of supply. Recovering materials from used batteries, electronic waste and discarded equipment can reduce the need for newly mined resources, although the quantity available depends on collection systems, processing capacity and the volume of products reaching the end of their useful life.

These measures address different parts of the supply chain. Exploration and overseas acquisitions can expand access to resources, processing investments can reduce dependence on foreign refining, and recycling can recover materials already present in the economy. Strategic stockpiling, meanwhile, can provide a buffer when normal supply channels are disrupted.

What it means for industry

For electric vehicle manufacturers, battery producers and renewable energy companies, the availability and cost of critical minerals can influence production costs and investment decisions. Defence manufacturers and electronics companies also require reliable access to specialised materials.

A strategic reserve could help reduce the risk of sudden shortages, particularly during periods of geopolitical tension or export restrictions. However, its benefits would depend on whether the government identifies the minerals most exposed to supply risks and establishes a workable system for releasing stocks when needed.

Stockpiling also involves costs. The government would have to account for procurement expenses, storage, inventory management and the possibility of changes in mineral prices or technology reducing the value of stored materials.

The proposed policy is therefore one element of a wider effort to make India’s industrial supply chains more resilient. Its long-term impact will depend not only on the size of the reserve but also on progress in domestic exploration, overseas sourcing, processing and recycling.